US prices rose by 5.6% in the year to July, the fastest inflation rate for more than 17 years, figures show.

US prices rose by 5.6% in the year to July, the fastest inflation rate for more than 17 years, figures show.

The rate of inflation was much greater than economists had predicted, driven higher by the 30% increase in energy prices during the period.

The rate of inflation was much greater than economists had predicted, driven higher by the 30% increase in energy prices during the period.

Food costs were 6% higher than a year earlier, the figures showed.

Food costs were 6% higher than a year earlier, the figures showed.

The price rises are squeezing consumers further. Average weekly earnings fell by 3.1% in July compared with a year earlier, the Labor Department said.

The price rises are squeezing consumers further. Inflation-adjusted average weekly earnings fell by 3.1% in July compared with a year earlier.

Despite the high inflation figure, economists predict the rate will begin to slow from next month as a result of recent falls in the oil price. Oil reached a record high of $147 a barrel in July but has fallen significantly since.

"[Inflation] is certainly above expectations here, but I think we've probably seen, for the near-term anyway, the worse of the inflation readings," said Keith Hembre, chief economist at First American Funds.

Gary Thayer from Wachovia Securities agreed: "If we don't get an unexpected shock that pushes commodity prices back up, this might be the worst inflation news that we'll get for a while."

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